Friday, July 17, 2015

In several recent
articles, Ed Morrissey of Hot Air has argued against the ACA in quite
vociferous terms.Unfortunately, his
articles not only misdiagnose the basic problems that led to passage of the
ACA, but offer completely unworkable solutions.

Let’s begin with
his mis-diagnosis, beginning with this:

Before we get to
ObamaCare, let’s recall the rationales for government imposing top-down control
over one-sixth of the nation’s economy. First,
we had to end the issue of the uninsured, which had spiked as a percentage of
the population after the Great Recession, mainly from unemployment.

Yes, Ed, it did spike after the recession.But the rate of uninsured was a 20+ year problem
in the making:

During 1968–1980, the percentage of
persons under age 65 years who had private coverage remained stable at about
79%, while the number with private coverage increased from 140.5 million to
154.1 million persons (Tables 1 and 2). During
1980–2007, the percentage with private coverage declined steadily, except
during 1996–1999. From 1999 to 2007, the percentage of persons under age 65
with any private coverage declined at an average rate of more than 1% per year,
to 67% in 2007; the number of persons with private coverage remained at about
174 million during this period. The downward trend in private coverage was
driven in large part by a decline in employer-sponsored coverage. In 2007, 62%
of persons reported employer-sponsored coverage, down from 71% in 1980.

Bankruptcies resulting from unpaid
medical bills will affect nearly 2 million people this year—making health care
the No. 1 cause of such filings, and outpacing bankruptcies due to credit-card
bills or unpaid mortgages, according to new data. And even
having health insurance doesn't buffer consumers against financial hardship.

The findings are from NerdWallet Health, a division of the price-comparison
website. It analyzed data from the U.S. Census, Centers for Disease Control,
the federal court system and the Commonwealth Fund, a private foundation that
promotes access, quality and efficiency in the health-care system.

…..

Even outside of bankruptcy, about 56
million adults—more than 20 percent of the population between the ages of 19
and 64—will still struggle with health-care-related bills this year, according
to NerdWallet Health.

And then there’s the fact that
insurance companies continued to whittle down the risks they covered, largely
by denying coverage to people with pre-existing conditions.So, the only people that were covered were
those who really didn’t need it.

So, to sum up, the health insurance
marketplace didn’t cover an increasing number of people for an extended period
of time. Insurers were legally allowed to
discriminate against people with pre-existing conditions. These two factors meant a
large number of people didn’t get medical care they needed.So, when they were finally able to get that
care, they had a lot of problems that built-up over a period of time.This is called pent-up demand, which isexactly how an insurance executive describes the current situation:

By contrast,
Marinan R. Williams, chief executive of the Scott & White Health Plan in
Texas, which is seeking a 32 percent rate increase, said the requests showed
that “there was a real need for the Affordable Care Act.”

“People are getting
services they needed for a very long time,” Ms. Williams said. “There was a
pent-up demand. Over the next three years, I hope, rates will start to
stabilize.”

Now, let’s look at Ed’s proposal for health care:

The only option
is to repeal it and introduce market-based reforms that eliminate price-signal
opacity, especially in routine care.

I love this option.For non-emergency care, consumers are going
to start calling around to doctors to compare prices.Really Ed?Let me use a routine physical as an example.First of all, what is supposed to happen at a
routine physical?What tests should be
done?What types of analysis should occur?I honestly don’t know.And, neither do most people.This alone gives dishonest doctors and
advantage: they can advertise the lowest price, do minimal work, and tell the
consumer that, “you don’t need all that other stuff.”Unless the consumer also happens to be a
doctor, he’ll most likely listen to the “learned professional” on this matter,
pay little money and receive sub-standard service.And, what about the idea of having a doctor
who actually knows you and your family history?Doesn’t that provide an asset to the patient that Ed’s system would
completely obliterate? And just how will be learn about prices, Ed? Wouldn't an exchange (like what we currently have and that was originally proposed by Republicans in response to Hillarycare in the mid-1990s) be the best place to accomplish that?

And then there’s the huge glaring problem of when most people access
medical care: when they need it, and so are therefore at an extreme negotiating
disadvantage.Let’s say you break your
arm.Under Ed’s scenario, this might not be considered
a catastrophe, and so would fall out of coverage.Are you going to call around to every doctor
to get a price quote on that?

But for an article that deals with a very complex international economic situation, his piece is completely devoid of any data. So, let's provide some context to point out how completely wrong his analysis is.

To start, you might want to go to the website tradingeconomics.com, which has a ton of economic information on literally every country in the world. Let's start by looking at what the Greeks have already done, starting with government spending. By the way -- I'll use pictures to make it easier.

Greece has already cut government spending by about 23% since 2009. ﻿That is called austerity, Jazz. Let's see what kind of effect it has had on the economy, starting with total GDP:

Total GDP at constant prices has decreased about 25%. That means there has been NO GROWTH. For the economically challenged, NO GROWTH IS BAD. Let's look at this from another perspective -- the GDP growth rate:

The Greek economy had three straight years of contraction. Again -- THIS IS BAD.

And, as a result, unemployment is very high:

Both long-term and standard unemployment metrics are at depression levels. Again, THIS IS BAD.

And, let's take a look at the debt/GDP ratio:

The purpose of austerity is to cut spending. This will make the bond vigilantes happy and also encourage consumer spending, thereby growing the economy, allowing it to increase at rate sufficient to lower the debt/gdp ratio. There's just one problem: as the chart above shows, it doesn't work as advertised. Not even close. In fact -- the EXACT OPPOSITE HAPPENS.

And, ask yourself this question: how many creditors negotiating with a bankrupt debtor don't take some kind of haircut on their loans? Answer from the real world: quite literally, none.

There is no reason to believe anyone at Hot Air has the background or capabilities to seriously discuss international or domestic economics. They embarrass themselves on a regular basis with their articles. But this latest piece is especially bad due to its complete omission of any data. And that is the real crime here: their readers think they're getting meaningful analysis. But, instead, they're getting noting of substance.

It appears that Germany and its creditor allies have crushed Greece. An insightful article in this mornings's Washington Post helps to expalin what Greeks have been thinking:

An overwhelming majority of those who voted no– about 88 percent — believed that, as a result of an OXI vote, negotiations would continue, as you can see below. Only 5 percent believed that a no vote would mean Greece would exit the euro zone.

By contrast, those who voted yes were much more worried about Grexit. In fact, 61 percent of them believed that would be the most likely outcome of a no vote.

In other words, the 61% of Greeks who voted "no" a week ago thought they were going to get an end to austerity and to keep the Euro too (and a pony!). So, apparently, did Tsipras. Syriza never had any intention of actually exiting the Euro if they couldn't get an end to austerity. Since a credible threat, carried through, to leave the Euro was their only leverage, they have been crushed by the creditors.

This entire episode, given Tsipras's apparent cluelessness, has been a failed turning point. Either there will be a move towards fiscal union on Germany's terms, or other southern European protest parties will understand that they must actually be prepared to leave the Euro.

Addendum: I don't mean to be hard on the Greek people, who have suffered badly and will now suffer even more. But they tried to bluff, when other Europeans could read poll results too, and knew that the Greek people were not in favor or leaving the Euro. So the creditors called Greece's bluff, and Greece folded.

It is easy for Americans to be armchair strategists from 4000 miles away, and think that surely, the Greeks must have a contingency plan for leaving the Euro. They didn't.

I don't mean to be too hard on the creditor nations either. It wasn't just the German people who opposed a bailout. Imagine your cousin Joe, to whom you made a loan last month, comes to you. He says he can't pay it back, so he asks you for a writedown. But he also asks for a new loan. How accomodating would you be? Probably, if you considered a new loan at all, you would demand a security - something you could sell if Joe defaults on the new loan too.

But again, the bottom line is, the Greek people had unrealistic expectations. They have been crushed, and now the creditor nations, like Germany, will use Greece as an example to insist that Europe follow their fiscal terms.

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